Office and Retail Portfolio

Portfolio Management Standards Focusing on Office Properties in Tokyo

The portfolio management standards of JPR has set investment ratios focused on investing in “office properties in Tokyo,” with the investment ratio of “Tokyo” in terms of geographical areas largely at 80% or more and up to 90% and the investment ratio of “office properties” in terms of asset classes largely at 70% or more and up to 90%.

Investment Ratio

Investment Ratio by area

Tokyo: 80 - 90%Other Cities: 20 - 10%

Investment Ratio by asset class

Office: 70 - 90%Retail: 30 - 10%

Diversified Investments in Terms of Geographical Areas and Asset Types with Considerations Given to the Risk – Return Profiles

Characteristics of Office Properties

Office properties are prone to be affected by the economy and their revenues tend to fluctuate, as their tenants are corporations. On the other hand, office properties situated in excellent locations or equipped with good facilities are expected to produce relatively stable rental income as tenants can be replaced fairly easily.

Characteristics of Retail Properties

Retail properties tend to show large fluctuations in revenues, especially for those with the entire buildings leased to single tenants, as tenants cannot be replaced easily. However, when leased to excellent tenants, retail properties are expected to produce stable cash flows with long contract terms.Moreover, “urban retail properties” can attract many customers and, given a variety of needs for opening stores in them, secure high tenant replaceability.

Characteristics of the Tokyo Area

Tokyo has formed one of the world’s largest metropolitan areas. In Japan, expanding economic disparity between the Tokyo area and other regions has propelled a unipolar concentration in Tokyo. With the population forecasted to continue increasing in the future, Tokyo is expected to maintain the world-leading urban size and achieve further progress.

Characteristics of Regional Areas

Revenues of excellent properties in regional cities tend to show few fluctuations and remain stable. Moreover, they can offer the advantage of geographical diversification against such disaster risks as earthquakes and flooding.

COLUMN

Diversified Investments in Terms of Geographical Areas and Shift to the Investment Policy Focusing on “Office Properties in Tokyo”

The business environment for office and retail properties have significantly changed compared with that when JPR started asset management in 2004, given such backgrounds as changes in consumption trends as well as accelerated unipolar concentration on Tokyo due to expanded economic disparity between the Tokyo area and other regional areas. In consideration of this situation, JPR changed its portfolio management standards to the present ones in the 16th fiscal period ended December 2009, clarifying its investment policy to focus on “office properties in Tokyo” that have larger prospects for growth.・Investment ratio by area Tokyo vs. other cities = roughly 60% vs. 40% → Tokyo vs. other cities = 80 to 90% vs. 20 to 10%・Investment ratio by asset class Office vs. retail = roughly 80% vs. 20% → Office vs. retail = 70 to 90% vs. 30 to 10%Since the change of the management standards, the investment ratio of office properties in Tokyo has expanded drastically, with the portfolio transforming to the present one featuring both growth potential and stability. For details of this matter, please refer to the news release “Notice Concerning Revisions to Internal Rules (JPR Asset Management Guidelines) at Asset Management Company dated December 24, 2009.